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While some Americans are struggling to get re-established in their jobs or find new employment post COVID-19, others are in a “rush to retire”. The global pandemic impacted everyone in similar ways, and each of us differently. With a heightened sense of “life is short,” some executives who are financially positioned to retire, are choosing to opt out of the workplace years ahead of their original planned retirement date.
Factors Influencing the Rush to Retire
Social distancing requirements that have kept workers at home have brought to light, for many people, an awareness of how physically and emotionally draining commuting to the office, traveling for business, and the general demands of the workplace can be. The global pandemic has also inspired many people to reevaluate what “really matters most” to them in life.
Over the past year, real estate values have generally been strong, and the stock market has trended somewhere between stable and outstanding. Suddenly, early retirement is very appealing to many workers whose assets have never looked healthier. Executives, who for years have tried to balance their work life and personal life, are taking an earnest look at their situation and choosing family and personal goals unrelated to career and workplace.
According to Bloomberg News, “…about 2.7 million Americans age 55 or older are contemplating retirement, years earlier than they’d imagined because of the pandemic.”
And an SCE Labor Market Survey, from the center for Microeconomic Data and the Federal Reserve Bank of New York, showed, “The average expected likelihood of working beyond age 67 declined to 32.9 percent in March 2021.” This number equals the lowest documented by the SCE Labor Market Survey.
NQDC Plans and the Rush to Retire at Your Organization
Boards are paying attention. Filling lower-level jobs left open by post-pandemic workplace transitions is a challenge. But what if your organization loses some of its key talent to early retirement? How well can your company function if multiple top executives all find the idea of an early exit very appealing?
Creatively designed nonqualified deferred compensation plans (NQDC) serve the objectives both of employers and executives in a variety of ways. NQDC plans can be structured specifically to help organizations in retaining key talent, positioning organizations to make discretionary contributions to enhance employee retention, including incentive-based contributions.
In a closely held corporation, the company might choose to fund an NQDC plan account for current executives who are considered to be possible future owners, setting an account to vest and distribute on a change in control. This structure creates an “insider transition” arrangement and incentivizes and rewards key executives. At the same time, this type of structure keeps options in play for the company’s current owner.
The only way for your organization to know what options a nonqualified deferred compensation plan may afford it is to invite an experienced executive benefits professional to thoroughly review the company’s existing plans and structure.
For executives contemplating an early exit, the best advice is to retire if, and when, you are comfortable doing so, just don’t make the decision in a rush. If you exit and find the life of a retiree isn’t all you hoped it would be, you may find it very difficult to return to the workforce with the status you previously held.
#retirement #nqdc #COVID19
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